Which of the following is most likely an advantage of an accelerated share repurchase (ASR) program over an open market share repurchase (OMR) program?   Question options:   a)  ASRs allow a company to provide longer periods of stock price support versus an OMR.   b)  ASRs send a stronger signal to markets when disclosed versus OMRs.   c)  ASRs are taxed at the capital gains tax rate, which can be lower than the ordinary income tax rate on OMRs.   d)  ASRs are more flexible than OMRs.

Which of the following statements is correct?   a. Companies may pay too high a price in a large open market repurchase if it takes too long to complete.     b. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.     c. An investor's capital gains from selling stock in a repurchase are always taxed at a higher rate than if the distribution were dividends.     d. The tax code encourages companies to pay dividends rather than reinvest earnings.     e. The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.

Which of the following statements is CORRECT?   Group of answer choices   When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.   Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the CAPM.   If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough reinvested earnings to take care of its equity financing and hence must issue new stock.   Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company's WACC.   When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.

Which of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debt

How does the WACC DCF methodology mechanically incorporate interest tax shields (select the best answer)? Group of answer choices By estimating free cash flows that incorporate the tax benefits of debt. By adding the tax benefits of interest payments to the value of the firm. By adding the PV of the interest tax shields to the value of the firm. By estimating a discount rate that incorporates the tax benefits of debt.

What would be a reason a company would want to understate income? A. to help nudge its stock price higher B. to lower its tax bill C. to show an increase in overall profits D. to increase investor confidence

Which of the following is a political risk to a company's bottom line? Spot exchange rates Changing tax rates Stable exchange rates Forward tax rates

Which of the followings proposes that there is a tradeoff between level of borrowing and benefit of tax shields up a point after which financial distress costs start kicking in?     CAPM     Static capital structure theory     M&M Proposition I     M&M Proposition II     Pecking order theory   Floation cost includes     Gross spread     Direct expenses     Indirect expenses     Abnormal returns     All of above   Which one of the followings states that the value of a firm is unrelated to the firm's capital structure?     Capital Asset Pricing Model     M&M Proposition I     M&M Proposition II     Law of One Price     Efficient Markets Hypothesis

Discuss why evaluating vertical equity simply based on tax rate structure may be less than optimal.

Ignoring possible tax effects and signaling costs, the total value of a firm’s equity remains the same irrespective of how the firm distributes its residual earnings—dividends or stock repurchases. Each distribution method has certain advantages and disadvantages.   Based on your understanding of dividends and stock repurchases, select the best terms to go with the statements. Management is likely to repurchase stock if it believes that the stock is undervalued/overvalued  ; this sends positive signals to investors.   True or False: Based on the company’s earnings in a particular year, repurchases can be made on an ad hoc basis without sending any negative signals to investors. True   False     Repurchases are also used to make significant adjustments to a firm’s liquidity/debt to equity   ratio.   True or False: Repurchases are more dependable than dividends because the investor wealth does not decrease after a repurchase, whereas the stock price decreases…